Russell and Another v. Inland Revenue Commissioners
 1 W.L.R. 834;  2 All E.R. 405;  S.T.C. 195; (1988) 132 S.J. 659; 1988 WL 623441
Chancery Division. Ch D
JUDGE: Knox J.
DATES: 1988 Jan. 27, 28; March 1
COUNSEL: Christopher McCall Q.C. for the plaintiffs.
Nicholas Warren for the Crown.
SOLICITORS: Charles Russell, Williams & James; Solicitor of Inland Revenue.
1 1 March. KNOX J. read the following judgment. This is an [*836] originating summons regarding a claim to capital transfer tax on the death of Mr. John Edwin Waterfield (the testator) who died on 31 January 1983 and probate of whose will dated 23 March 1978 was granted to the plaintiffs, Sir Charles Russell and Mr. Colin Patrick Russell, on 20 May 1983. By that will the testator appointed the plaintiffs his executors, and by clause 2 bequeathed certain contingent reversionary interests to his daughters. He then by clause 3 gave his residuary real and personal estate on common form trusts for sale and conversion, and by clause 4 he gave the proceeds thereof to his wife, now his widow, absolutely. The only other provisions were an investment and charging clause which are not relevant for present purposes.
The testator left surviving him four daughters as well as his widow. Part of his estate at the date of his death consisted of a reserve fund at Lloyds, of which he was an underwriting member, and the benefit of his unclosed years underwriting activities. The testators will had the effect that the capital transfer tax nil rate band, which at the time of his death went from nothing to £55,000, was not fully utilised. A fortiori the benefit conferred by relief in respect of business assets, which include underwriters interests, was not taken advantage of. Accordingly his widow and the testators executors entered into four deeds ranging in date between 6 and 21 October 1983 conferring on each of the testators daughters in order of seniority the right to have £ 25,000 raised out of the testators underwriting interest. The first of those deeds provides as follows. It is made between the widow and the executors, recites the will, death and probate of that will, and then recites:
(3) The parties hereto are desirous of varying the dispositions effected by the will of the property comprised in the estate of the testator immediately before his death in manner hereinafter appearing.
The operative part reads, in clause 1:
The will shall henceforth be construed and take effect and shall be deemed to have taken effect as from the death as if the new clause 2(A) set out in Schedule hereto had been inserted after the existing clause 2 thereof.
Clause 2 I need not read. the schedule reads:
(1) I give to my trustees my underwriting interest (consisting of my Lloyds deposit reserve funds and profits for the years open at the date of my death).
(2) My trustees shall raise out of the said interest the sum of £25,000 and shall hold the same upon trust for my daughter Angela Hermione Waterfield absolutely.
(3) Subject as aforesaid my trustees shall hold the said interest upon trust for my wife absolutely.
(4) My trustees may exercise the powers of appropriation conferred on a personal representative by section 41 without the necessity of obtaining any of the consents required by that section.
The second deed followed the pattern of the first very closely. It was dated 11 October 1983 and was made by the same parties. The recitals were for all practical purposes the same save that an intention was recited of further varying the dispositions of the testators will. The operative part contained this in clause 1: [*837]
The will shall henceforth be construed and take effect and shall be deemed to have taken effect as from the death as if the new clause 2(A) set out in the schedule hereto had been inserted after the existing clause 2 thereof and in substitution for clause 2A as inserted by the hereinbefore recited prior deed.
The schedule followed the schedule of the first deed save that there was inserted after the direction to raise £25,000 for the eldest daughter:
My trustees shall raise out of the said interest the further sum of £25,000 and shall hold the same upon trust for my daughter Adrienne Rosemary Waterfield.
The third and fourth deeds followed exactly the same pattern as the second with the addition of similar directions in favour of the two youngest daughters.
Varying views were expressed in argument on the question whether, if the underwriting interests were insufficient to produce the sums of £25,000, all four daughters interests would abate rateably or whether the elder would rank in priority to the younger. It is not necessary for me to express a view on this question and I refrain from doing so in the absence of any representation for the daughters individually. On the evidence the question is in any event singularly unlikely to occur because the indications are that the fund will comfortably exceed £100,000.
Disappointment was in store for the executors and the testators family, for the capital transfer tax authorities did not accept that the effect of the four deeds executed in October 1983, which I shall call the 1983 deeds, was as beneficial as the executors hoped of the business relief from capital transfer tax operating to reduce the value of the daughters legacies below the capital transfer tax threshold. A further deed was therefore executed just before the expiration of a period of two years after the testators death dated 29 January 1985, The parties were the widow, the testators four daughters and the executors. It is expressed to be supplemental to the will and the 1983 deeds, and recited the death and probate and, in recital (3): The parties hereto are desirous of making such further variation of the dispositions effected by the will as is hereinafter contained. Clause 1 of the operative part reads:
The will shall henceforth be construed and take effect and shall be deemed to have taken effect as from the death of the testator as if the new clause 2A set out in the second schedule hereto had been inserted after the existing clause 2 thereof and in substitution for the clause 2(A) inserted therein by the 1983 deeds.
The second schedule reads:
(1) I give to my trustees my underwriting interest (consisting of my Lloyds deposit reserve fund and profits for the years open at the date of my death).
(2) My trustees shall divide the said interest into four equal parts and shall hold such parts upon the following trusts that is to say:
(a) my trustees shall hold one such part upon trust for my daughter Angela Hermione Waterfield absolutely " Sub-clauses (b), (c) and (d) follow in the same form and deal with trusts in favour of each of the other three daughters of the testator.
(3) My trustees may exercise the power of appropriation conferred [*838] on a personal representative by section 41 of the Administration of Estates Act 1925 without the necessity of obtaining any of the consents required by that section.
The basic framework of capital transfer tax was contained in the Finance Act 1975. Section 19(1) reads: "A tax, to be known as capital transfer tax, shall be charged on the value transferred by a chargeable transfer." Section 20:
(1) The following provisions of this section shall have effect, subject to the other provisions of this Part of this Act, for determining for the purposes of capital transfer tax what is a chargeable transfer and what value is transferred by a chargeable transfer.
(2) Subject to subsections (3) and (4) below, a transfer of value is any disposition made by a person (the transferor) as a result of which the value of his estate immediately after the disposition is less than it would be but for the disposition; and the amount by which it is less is the value transferred by the transfer.
Subsections (3) and (4) I need not read. Subsection (5) reads: "A chargeable transfer is any transfer of value made by an individual after 26 March 1974 other than an exempt transfer." Exempt transfers are defined in Schedule 6, which is introduced by section 29 of the Finance Act 1975, which reads:
Schedule 6 to this Act shall have effect with respect to exempt transfers and Schedule 7 to this Act with respect to the exemptions and reliefs mentioned therein.
Those provisions contain the ground rules for taxing dispositions inter vivos. Settled property is dealt with by means of Schedule 5, introduced by section 21 of the Act of 1975. Transfers on death, which is what is in issue here, are dealt with by section 22(1), which reads:
On the death of any person after the passing of this Act tax shall be charged as if, immediately before his death, he had made a transfer of value and the value transferred by it had been equal to the value of his estate immediately before his death, but subject to the following provisions of this section.
The amount of the value transferred thus depends on the value of the deceaseds estate, and that is defined by section 23(1):
For the purposes of this Part of this Act, a persons estate is the aggregate of all the property to which he is beneficially entitled, except that the estate of a person immediately before his death does not include excluded property.
It is common ground that sections 22(1) and 20(5) applied on the testators death so that capital transfer tax was chargeable as if the testator had made a transfer of value and the value transferred was equal to the value of his estate immediately before his death unless that transfer was an exempt transfer.
The notional transfer of value immediately before his death was liable to be treated as an exempt transfer to the extent of the gift of the residue to the widow. This was because of Schedule 6 to the Finance Act 1975, paragraph 1(1), of which, as amended by section 94 of the Finance Act 1976, reads: [*839]
Subject to the provisions of Part II of this Schedule and the following provisions of this paragraph, a transfer of value is an exempt transfer to the extent that the value transferred is attributable to property which becomes comprised in the estate of the transferors spouse or, so far as the value transferred is not so attributable, to the extent that that estate is increased.
If the will by itself had been the only operative provision the whole estate would have been exempt from capital transfer tax, and looking at matters from the point of view of the testators own family the nil rate band in his estate would have been wasted for he made no chargeable transfers during his life.
Equally the relief for business assets in his estate would have been wasted because it was not utilised. That relief was available in principle pursuant to section 73 of the Finance Act 1976 (as amended by the Finance Act 1982), the first section in Part IV of that Act. Section 73 reads:
Schedule 10 to this Act shall have effect for reducing, in the cases mentioned therein,
(a) the value transferred by a transfer of value; and
(b) the amount on which tax is chargeable under Chapter II of Part IV of the Finance Act 1982.
Section 132(3)(d) of the Finance Act 1976 reads:
In this Act Part IV shall be construed as one with Part III of the Finance Act 1975;
and section 132(4) reads:
Except so far as the context otherwise requires, any reference in this Act to any enactment shall be construed as a reference to that enactment as amended, and as including a reference to that enactment as applied, by or under any other enactment, including this Act.
Schedule 10, as amended by section 64 of the Finance Act 1978, contains the following. Paragraph 2:
(1) Where the whole or part of the value transferred by a transfer of value is attributable to the value of any relevant business property and the transfer is made after 6 April 1976, the whole or that part of the value transferred shall be treated as reduced by the appropriate percentage, but subject to the following provisions of this Schedule . The appropriate percentage is
(a) in the case of property falling within paragraph 3(1)(a) or (b) below, 50 per cent .
Paragraph 3(1) provides:
Subject to the following provisions of this paragraph and to paragraphs 4, 5 and 8(3) below, in this Schedule relevant business property means, in relation to any transfer of value,
(a) property consisting of a business or interest in a business
Other types of business assets qualified for similar reductions in value, some of 50 per cent. some of 30 per cent. and some of 20 per cent. I have read the provisions in the form in which they were operative at the date of the testators death. It is common ground that the testators Lloyds interests referred to in the 1983 deeds and the 1985 [*840] deed qualified for 50 per cent. relief because they were property consisting of a business and therefore relevant business property. It is common ground that business relief operates by a notional reduction of the value transferred by a transfer of value and not by way of a reduction in the rate of tax or by partial exemption of a transfer of value.
The provisions on which reliance was placed when the 1983 deeds and the 1985 deed were executed and which form the principal issue in these proceedings are section 68 of the Finance Act 1978, one of the sections in Part IV of that Act. So far as material the section reads:
(1) Subject to the provisions of this section, where within the period of two years after a persons death any of the dispositions (whether effected by will, under the law relating to intestacy or otherwise) of the property comprised in his estate immediately before his death are varied, or the benefit conferred by any of those dispositions is disclaimed, by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions
(a) the variation or disclaimer shall not be a transfer of value; and
(b) Part III of the Finance Act 1975 shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred.
(2) Subsection (1) above does not apply to a variation unless an election to that effect is made by written notice given to the Board within six months after the date of the instrument, or such longer time as the Board may allow, by
(a) the person or persons making the instrument; and
(b) where the variation results in additional tax being payable, the personal representatives; but personal representatives may decline to join in an election only if no, or no sufficient, assets are held by them in that capacity for discharging the additional tax .
(5) For the purposes of subsection (1) above the property comprised in a persons estate includes any excluded property but not any property to which he is treated as entitled by virtue of paragraph 3(1) of Schedule 5 to the said Act of 1975; and that subsection applies whether or not the administration of the estate is complete or the property concerned has been distributed in accordance with the original dispositions .
(7) Subsections (1) to (5) above apply to a variation or disclaimer made on or after 11 April 1978 and as respects any such variation or disclaimer supersede section 47(1) and (2) of the said Act of 1975;
Section 80(3)(d) provides: "In this Act Part IV shall be construed as one with Part III of the Finance Act 1975"; and section 80(4) is in exactly the same terms as the provisions of section 132(4) of the Finance Act 1976, which I have already read.
The capital transfer tax authorities claimed that whereas the 1983 deeds qualified as coming within the scope of section 68 of the Finance Act 1978 the 1985 deed did not, since it was not a variation of the testators dispositions but of the dispositions effected by the 1983 deeds; and, secondly, that business relief was not available in respect of gifts to the testators daughters in the 1983 deeds, which were the only relevant ones by reason of the view taken regarding the scope of section 68 of the Finance Act 1978. These were not contentions with which the executors agreed, and the matter comes before the court by way of originating summons on appeal from a notice of determination by the [*841] Inland Revenue Commissioners dated 6 July 1987. Pursuant to paragraph 7(3) of Schedule 4 to the Finance Act 1975 the appeal has been brought direct to the High Court since the issues are confined to questions of law, that is to say the true construction of the 1983 deeds, the 1985 deed and, primarily the relevant fiscal legislation.
The notice of determination reads:
The Commissioners of Inland Revenue have determined in relation to (1) the transfer of value on the death of John Edwin Waterfield (the deceased) who died on 31 January 1983, and whose will was dated 23 March 1978 (the will); (2) four deeds (the October 1983 deeds) (3) a deed of variation (the January 1985 deed). That (1) the October 1983 deeds varied the dispositions effected by the will of the deceased; (2) the October 1983 deeds are for capital transfer tax purposes to be treated as if they had been effected by the deceased; (3) the January 1985 deed varied dispositions treated as if they had been effected by the deceased; (4) a variation of a disposition treated as if it has been effected by the deceased falls outside Finance Act 1978, section 68; (5) accordingly, upon a proper application of the said section 68, the transfer of value on the death of the deceased included a chargeable transfer of four legacies of £25,000 each; (6) business relief was not available under Finance Act 1976, Schedule 10, paragraph 3(1)(a) in respect of the said legacies; (7) under the provisions of paragraph 19(1) and (3) Part III Schedule 6 Finance Act 1975 the transfer at 5 falls to be grossed to £124,583. The tax payable thereon is £24,583; (8) as a personal representative of the deceased you are liable for such tax if paragraphs (1) to (6) above be correct in law together with interest thereon," and then details were given of the interest.
Before the first and principal question, the true scope of section 68 of the Finance Act 1978 in relation to the 1983 deeds and the 1985 deed, can be answered, it is desirable to see how far those documents were on their true construction variations of dispositions of the property in the testators estate effected by his will or variations of later dispositions effected by the widow in one or more or all of the 1983 deeds. There can of course be no doubt but that the first of the 1983 deeds effected a variation of the testators dispositions. In my judgment the other three 1983 deeds fall into the same category. True it is that, formally, the whole of clause 2(A) inserted by the first of the 1983 deeds is replaced by the new clause 2(A) inserted by way of substitution by the second of the 1983 deeds, and so on down the line. But the effective provisions in the first of the 1983 deeds, clause 2(A), are three only. First, the trust to raise £25,000 out of the underwriting interest for the eldest daughter; second, a trust of what remains of the underwriting interest for the widow and, third, a power of appropriation which, although it does not so provide in terms, can only sensibly have any effect in relation to the £25,000 sum. The trust to raise £25,000 is exactly reproduced in the second of the 1983 deeds, and so is the power of appropriation in relation thereto. To that extent the second of the 1983 deeds is a repetition and not a substitution, and therefore not a variation. The trust of the balance of the underwriting interest in favour of the widow in the first of the 1983 deeds was not itself a variation of the provisions of the testators will for a very similar reason, namely, that it was a repetition of the gift of residue in the will and only a statement of what [*842] the law would have implied if it had not been expressly stated. To the extent therefore that the second of the 1983 deeds trenched on that trust by creating a second trust to raise £25,000, it varied the dispositions contained in the testators will rather than those contained in the first of the 1983 deeds.
There remain two factors. First, there was the theoretical possibility that the underwriting interest would not produce £50,000 as regards the second of the 1983 deeds, £75,000 as regards the third of the 1983 deeds and £100,000 as regards the last of the 1983 deeds. Had that happened the question of priority between the daughters would have arisen, and if it had been answered in the sense that the daughters took pari passu and not in priority to each other by chronological order of the 1983 deeds, the conclusion I have stated above that the creation of an additional trust to raise £25,000 only trenched on the gift to the widow would be falsified and each of the last three of the 1983 deeds would have varied at least one of the earlier ones. However, in the light of the evidence that the actual value at the testators death to the best of the knowledge and belief of the executors was investments and cash of £88,118 plus subsequent profits for other years totalling £28,276, I consider it unnecessary to go into that aspect of the matter. In my judgment the effect of the 1983 deeds has to be assessed against the known factual background, and that on the evidence justifies an assumption of sufficient value in the underwriting assets to render academic questions of abatement.
The second factor not so far dealt with is the gradual extension of the power of appropriation in each of the 1983 deeds. This is a factor which can in my view be treated as de minimis. The power of appropriation could theoretically be regarded as impinging not only on the widows rights as residuary legatee but also on the entitlement of daughters other than the one in whose favour the power is exercised. But a power of appropriation is only ancillary and administrative although its exercise can, in times of fluctuating values, have a considerable impact on beneficiaries rights inter se. In the circumstances of this case I consider it legitimate to treat the power of appropriation as an administrative appendage to the successive trusts to raise £25,000 and as not by itself giving rise to a separate variation of earlier dispositions.
The 1985 deed stands on a different footing from the 1983 deeds although the same drafting technique of inserting a new clause 2(A) in substitution for the ones in the earlier 1983 deeds was used. That feature I have already held is not in itself significant. What is significant is that the rights of the testators daughters under the 1983 deeds were substantially altered and not merely increased by the 1985 deed. Under the 1983 deeds the testators daughters were merely entitled to require a realisation sufficient to produce £ 25,000. They had no right in specie to any asset. Under the 1985 deed they became entitled to a one-quarter share in the testators underwriting interests subject of course to the due process of administration of his estate. That right would entitle each of the daughters to ask for a transfer in specie of their rateable share of pure personalty subject, first, to the due process of administration and, secondly, to the possibility of there being special circumstances attaching to the underlying property which prevented such a right from being exercised. Those two qualifications do not detract from the conclusion that their rights under the 1985 deed were significantly different from their rights under the 1983 deeds, and from that it follows that the 1985 [*843] deed did effect a variation of the dispositions contained in the 1983 deeds of the property comprised in the testators estate.
The 1985 deed also effected a variation of the disposition contained in the testators will in relation to the excess over £100,000 value of his underwriting interest. This necessarily follows from my acceptance of the proposition that the last three of the 1983 deeds constituted variations not of the disposition contained in the earlier 1983 deed or deeds but of the dispositions over residue contained in the testators will. No argument however was addressed to me to the effect that one should sever the dispositions in the 1985 deed between variations of the testators will on the one hand and variations of dispositions effected after his death by the beneficiaries on the other hand. Disregarding that possibility, the validity of the proposition contained in the notice of determination, that a variation of a disposition treated as if it had been effected by the deceased falls outside section 68 of the Finance Act 1978 has to be decided since I have held that the 1985 deed contains such a variation.
It was common ground that most of the requirements of section 68 were satisfied by the 1985 deed. Thus it was accepted that (1) the variation was by an instrument in writing made by the persons who benefit; (2) the writing was made within two years of the testators death; (3) an election was duly made within the permitted six months under subsection (2); and (4) no outside consideration was payable. That leaves the critical question whether the 1985 deed contained a variation of the dispositions, whether effected by will, under the law relating to intestacy or otherwise, of the property comprised in the testators estate immediately before his death. Intestacy can be ignored.
The first problem is what is the ambit of the dispositions in question without bringing in the statutory hypothesis that variations by beneficiaries were effected by the deceased. On this I accept the argument advanced on behalf of the Crown that the words "or otherwise" must be construed in the light of the ejusdem generis rule as limited to dispositions, whether by acts of parties or operation of law, which take effect on the death of the deceased and do not therefore by themselves include every subsequent dealing within the two-year period by any person beneficially entitled to an interest in the deceaseds estate. The contrary was not seriously contended by Mr. McCall for the plaintiffs who did not put his case on the ambit of the expression "or otherwise" higher than to rely on it as showing the generality of the phrase. I accept that it is general: I do not accept that it includes without benefit of statutory hypothesis the post-obit dealings by beneficiaries of the estate. On that footing the issue narrows itself to the one principally debated before me: whether it is legitimate to import into the construction of section 68 the statutory hypothesis which it erects itself, namely, that what the beneficiaries effect within the period two years after the death of the deceased is to be treated as if it had been effected by the deceased himself. I have come to the conclusion that it is not legitimate to do so. The argument for the plaintiffs on this point was primarily that it is the effect of section 68(1) if construed literally, and that such a result was consistent with the history of the legislation and the purpose behind it.
An issue was raised on the literal meaning of section 68(1) concerning the expression in section 68(1)(b) "Part III of the Finance Act 1975 shall apply as if the variation had been effected by the deceased." For the Crown it was contended that "Part III of the Finance Act 1975" did not extend further than the original piece of legislation with such amendments [*844] as had been introduced by later statutes, and in particular that it did not include other provisions which are only directed to be construed as one with Part III of the Finance Act 1975, such as section 68 of the Finance Act 1978 itself, which along with the rest of Part IV of that Act is by section 80(3)(d) directed to be construed as one with Part III of the Finance Act 1975.
It was Parliaments practice in enacting legislation which introduced amendments to the corpus of capital transfer tax legislation to include a paragraph in the same terms as section 80(3)(d) of the Finance Act 1978: see section 132(3)(d) of the Finance Act 1976; section 59(3)(d) of the Finance Act 1977 and section 80(3)(d) of the Finance Act 1978 itself. Within those Acts, which altered the corpus of capital transfer tax legislation, there are at least three different techniques adopted. First, there is the direct amendment of a provision in Part III of the Finance Act 1975. No problem arises with regard to that. It is specifically dealt with by section 80(4) of the Finance Act 1978 and identical provisions in other Acts. Secondly, there are provisions which, although not in terms amendments of provisions in Part III of the Finance Act 1975, are nevertheless declared by Parliament to supersede provisions in that Part. Subsections (1) to (5) of section 68 of the Finance Act 1978 fall into this category. Another later and much more extensive example is Chapter II of the Finance Act 1982, which contained a new regime covering settled property without interests in possession. Thirdly, there are provisions which just introduce a new feature in the capital transfer tax legislation as from a particular date and are not expressed either in terms of an amendment of Part III of the Finance Act 1975 or as superseding any part thereof. An example of that is in section 73 of the Finance Act 1976, which introduced relief for business property.
It is not necessary for me to go further than to say that I am satisfied that an enactment stated to supersede one contained in Part III of the Finance Act 1975 is applied by a later enactment which is expressed to be construed as one with that Part of that Act and which provides that Part III of the Finance Act 1975 shall apply. In my judgment a section which supersedes another takes the latters place in the legislative scheme. In fact I should be surprised if provisions such as section 73 of the Finance Act 1976, which is not expressed to supersede any part of the Finance Act 1975, did not apply in relation to variations within section 68 of the Finance Act 1978. If they did not do so it would appear that no business relief was available save by way of extra-statutory concession in relation to variations by beneficiaries which are treated pursuant to section 68 of the Finance Act 1978 as if effected by the deceased. However this particular aspect of the matter was not argued before me and I do not find it necessary to express a concluded view on the point.
My principal reason for accepting the Crowns submission that the hypothesis contained in section 68(1) of the Finance Act 1978 should not be applied to that subsection itself is that this involves taking the hypothesis further than is necessary. No authority was cited to me of a statutory hypothesis being applied to the very provision which enacts the hypothesis. Such a tortuous process would merit a specific reference in the enactment to itself, as indeed is found for example in section 80(4) of the Finance Act 1978. The absence of such a reference lends some support to the view that this was not what Parliament had in mind.
[*845] I was referred to statements in earlier authorities concerning the extent to which effect should be given to statutory hypotheses. On one side reliance was placed on Lord Asquiths well-known observation in East End Dwellings Co. Ltd. v. Finsbury Borough Council  A.C. 109, 132:
If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.
On the other side reliance was placed on Sir Robert Megarry V.-C.s comment in Polydor Ltd. v. Harlequin Record Shops Ltd.  1 C.M.L.R. 669 [ed. note: reversed by:  2 C.M.L.R. 413,  F.S.R. 362], 673, in relation to that passage:
Accept that to the full, and still I can see no reason why the word inevitably should be softened into probably. The hypothetical must not be allowed to oust the real further than obedience to the statute compels.
For my part I find such general statements of limited assistance in solving this particular problem: compare Slade L.J. in Macpherson v. Inland Revenue Commissioners  S.T.C. 73, 80, when he said:
I agree that in the present case only limited assistance can be derived from general canons of construction in choosing between the alternative interpretations of the Act.
I should add that I see no unjust, anomalous or absurd results in either construction, since once Parliament had swallowed the camel of allowing testamentary dispositions to be rewritten with retrospective effect I see no compelling reason why it should strain at the gnat of allowing a second attempt within the relatively short time limit of two years. On the other hand I am also unable to derive any clear guidance one way or the other from the earlier legislative history of similar provisions allowing a limited rewriting of history for fiscal purposes. The earlier versions caused considerable doubt and difficulty, largely through the use of the expression deed of family arrangement, and were discarded when section 68 of the Finance Act 1978 was enacted.
It was submitted by Mr. McCall that the distinction between variations of the original dispositions taking effect on death, on the one hand, and variations of such variations, on the other, lead to difficulties in distinguishing between the two and that these difficulties were an indication that such a distinction was conceptually uncertain and therefore not to be attributed to Parliament. I accept that there may well often be, and indeed are in the present case, difficulties in drawing the line between the two, but I do not find the distinction in the least unclear in principle. Nor do the difficulties, such as they are, point to any conclusion in favour of the plaintiffs stronger than that Parliament may perhaps not have foreseen this precise point. Equally I do not find the insertion of subsection (1A) into section 47 of the Finance Act 1975 a very general provision whereby events within two years of a testators death otherwise giving rise to charge to tax under the regime dealing with settlements without interest in possession are effectively regarded as occurring just before the testator died, a reliable guide to solving the present problem. Although the provision is very wide it could only [*846] operate once and in any event the problem dealt with is different. Finally on this question I should mention that I have not placed any significant weight on the argument advanced by the Crown that the plaintiffs construction could lead to the evasion of the requirement in section 68(2) for an election to be made within six months. I am not convinced that this is so. That requirement of a written election is as explicable on the footing of administrative certainty and protection for beneficiaries as it is on the footing of protection to the Crown.
[His Lordship then went on to consider whether in the circumstances relief from the tax for business assets was available in respect of the gifts contained in the 1983 deeds in favour of the testators four daughters. He concluded that where there was a gift which as a matter of construction of the relevant documents could only be satisfied by resort to an identified asset which was the subject of business relief the basis of valuation for the purposes of Part III of Schedule 6 to the Finance Act 1975 should be the same as that applicable to a gift of that asset, or of a share of that asset in specie. In the result business relief was available to the plaintiffs in respect of the gifts to the daughters in the 1983 deeds.]
Declaration accordingly. Crown to pay plaintiffs costs.